MIDTERM EXAM REVIEWER sector has grown continuously, particularly

MEL 4143 – SERVICE MARKETING in the last two decades, as its growth
------------------------------------------------------- increased from 4% in the 1990s to 5.3% in
------- the 2000s. For the 2010 to 2014 period, it
posted a very modest growth rate of 6.6%.
CHAPTER 1.1 – CREATING VALUE IN THE Broad growth has taken place in the sector
SERVICE ECONOMY as most of its sub-sectors have
also registered consistently rising growth
Why study services? rates over the years.
Services are the driving force behind the The 2010 to 2014 average growth rates of
fast growth of an economy. most of the sub-components of the
services sector have increased from their
Services Dominate the Global 1990s and 2000s values. The most
notable increases have been manifested by
the construction, finance and real estate
sub-sectors. Meanwhile, the sub-sectors
that have experienced a slowdown
in average growth rate are private services,
transport, communication and storage.
Nonetheless, it is crucial to point that the
recent average growth rates of these two
sub-sectors are still above 5%, indicating
modest growth performance.
Contribution of services industries to GDP
globally

Most new jobs are generated by

services
 Call center representative
 Bank teller
 Flight attendant
 Personal trainer
 Server
 Wedding planner
 Restaurant manager
 Hotel manager How B2B services improve the productivity
 Accountant of individual firms and drive
 Attorney economic development?
 Physician
Powerful forces that are transforming
Pre-transaction service markets
Transaction  Government policies
Post transaction  Social changes
 Business trends
Economic Contribution and  Globalization
Growth Performance  Advances in ICT
Since the 1990s, the services sector has
been a major source of economic growth
for the Philippines. On the average, the
 the decision to outsource and to offshore to
a foreign supplier simultaneously.
Arrow 3 - The fourth scenario is when firms
source from foreign locations by establishing
a subsidiary abroad.
Arrow 4 – This is often referred to as
“captive offshoring.”
Arrow 5 - combining outsourcing an
offshoring implies shifting the service
provision from a foreign affiliate to a foreign-
Outsourcing vs. Offshoring owned supplier.
Difference between outsourcing and
offshoring of services What are services?
 New communications technologies  Services are economic activities
mean that some service work can be performed by one party to another.
carried out far from where customers Often time - based, these
are located. performances bring about desired
 Offshoring refers to services that are results to recipients, objects, or other
conducted in one country and assets.
consumed in another.  In exchange for money, time, and
 Prior to the turn of the century, effort, service customers expect value
offshoring was mostly confined to the from access to labor, skills, expertise,
manufacturing sector, offshore goods, facilities, networks, and
services have since emerged as a systems. However, they do not
dynamic global sector over the past normally take ownership of the
two decades, driven by the rise of physical elements.
information and communication  The definition emphasizes that while
technologies, the international customers expect to obtain value from
tradability of services, and the their service purchases in exchange
evolution of global business services for their money, time, and effort, this
models. value comes from access to a variety
of value-creating elements rather
than transfer of ownership.

Four Categories of Services - A Process

Perspective
 There are major differences among
services depending on what is being
processed.
 Services can "process" people,
physical objects, land data, and the
nature of the processing can be
tangible or intangible.
Arrow 1 - describes a firm’s decision to
outsource services domestically. Tangible actions vs Intangible actions
Arrow 2 - describes a situation where a firm  Tangible actions are performed on
switches from a domestic supplier to a people's bodies or to their physical
foreign supplier. In some cases, firms make possessions.
  Intangible actions are performed on  These services touch people's minds
people's minds or to their intangible and have the power to shape
assets. attitudes and influence behavior.
 This gives rise to the classification of Mental stimulus processing services
services into four broad categories. include education, news and
They are people- information, professional advice, and
processing, possession-processing, some religious activities.
mental stimulus , and information  Examples: movie theater, education
processing.
Information Processing
 Information can be processed by
information and communications
technology (often referred to as ICT),
and/or by professionals who use their
brains to perform information
processing and packaging.
 Some services that are highly
dependent on the effective collection
and processing of information are
financial and professional services
People Processing
such as accounting, law, marketing
 To receive these types of services,
research, management consulting,
customers must physically enter the
and medical diagnosis.
service system.
 Examples: life insurance, internet
 They are an integral part of the
provider, legal services
process and cannot obtain the desired
benefits by dealing at arm's length
Can the marketing concepts and practices
with service suppliers.
developed in manufacturing companies be
 In short, they must enter the service
directly transferred to service organizations
factory, a physical location where
where no transfer of ownership takes place?
people or machines (or both) create
 The answer is often "no."
and deliver service benefits to
customers.
Characteristics of services and the
 Examples: dental cleaning, nail salon,
distinctive marketing challenges they
restaurant
pose
 Services tend to have different
Possession Processing
features from goods, including the
 Often, customers ask a service
frequently cited four characteristics of
organization to provide tangible
intangibility, heterogeneity (variability
treatment for some physical
of quality), inseparability of
possession — a house that has been
production and consumption, and
invaded by insects, a hedge that has
perishability of output 2 , or IHIP for
grown too high, a malfunctioning
short.
elevator a broken screen of a
smartphone, a parcel that needs to be
sent to another city, or a sick pet.
 Examples: shoe repair, dry cleaning*

Mental Stimulus Processing

  People

(1) Product Elements

 Service products consist of a core
product that meets the customers’
primary need and a variety of
supplementary service elements that
are mutually reinforcing, and add
value to help customers to use the
core product more effectively.
 Supplementary service elements
includes providing information,
consultation, order taking, hospitality,
handling exceptions, etc.
 Example: fast food chains, haircut
salon, health check-up, derma
treatment

(2) Place and Time

 Service distribution may take place
through physical or electronic
channels (or both), depending on the
nature of the service.
 Distribution of Core
versus Supplementary Services
 Importance of the Time Factor

Distribution of Core versus Supplementary

Services.
Can we consider learning or understanding  Distinguish between its potential for
services offers as a personal competitive delivering information-based core
advantage? products (those that respond
------------------------------------------------------- to customers’ primary requirements)
------- and simply providing supplementary
services that facilitate purchase and
CHAPTER 1.2 – CREATING VALUE IN THE use of physical goods.
SERVICE ECONOMY  Example: Banks (BPI, Metrobank,
China bank, BDO, etc..), PLDT home
What are the P’s in Marketing Mix? Wi-Fi
Traditional Marketing Mix Applied to
Services Importance of the Time Factor.
 Product elements  Speed and convenience of place and
 Place and time time have become important
 Price and other user outlays determinants of effective distribution
 Promotion and education and delivery of services in the market.

Extended Marketing Mix Applied to Services

 Process
 Physical environment
 spent, unwanted mental and physical
effort, and exposure to negative
sensory experiences.

Most Service Products Cannot be

Inventoried.
 If there is no demand, unused capacity
is wasted and the firm loses the
chance to create value from these
assets. During periods when demand
exceeds capacity, customers may be
turned away or asked to wait until
later. A key task for service
marketers, therefore, is to find ways
of smoothing demand levels to match
available capacity using dynamic
pricing strategies.
 Example: 15% off between 9am to
5pm for ride-hailing applications.

(4) Promotion and education

This component plays three vital roles:
 Providing needed information and
advice
 Persuading target customers to buy
the service product
 Encouraging them to take action at
specific times

Can we sell time? Services are Often Difficult to Visualize and

Understand as Intangible Elements Tend to
(3) Price and other User outlays Dominate Value Creation
 For customers, price is a key part of
the costs they must incur to obtain
desired benefits.
 To calculate whether a particular
service is “worth it,” they may go Customer–Customer Interactions Affect the
beyond just money and assess how Service Experience
much time and effort are involved
 For Service marketers, therefore, must
not set only prices that target
customers are willing and able to pay,
but also understand — and seek to Extended Marketing Mix Applied to
minimize, where possible — other Services
burdensome outlays that customers  Process
incur in using the service.  Physical environment
 These outlays may include additional  People
monetary costs (such as travel
expenses to a service location), time (5) Process
  Smart managers know that where customer satisfaction and service
services are concerned, how a firm productivity.
does things is as important as what it
does. Therefore, creating and (7) People
delivering product elements requires  Despite advances in technology, many
design and implementation of services will always need direct
effective processes. interaction between customers and
 Nevertheless, the best service firms service employees (. You must have
have made significant progress in noticed many times how the
reducing variability by carefully difference between one service
designing customer service supplier and other lies in the attitude
processes, adopting standardized and skills of their employees.
procedures and equipment,  Service firms need to work closely with
implementing rigorous management of their human resources (HR)
service quality, training employees departments and devote special care
more carefully, and automating tasks in selecting, training, and motivating
previously performed by humans. their service employees.
-------------------------------------------------------
Customers Are Often Involved in Co- -------
production CHAPTER 2 – UNDERTANDING SERVICE
CONSUMERS

Three-stage Model of Service

Demand and Capacity Need to be Balanced Consumption
 For services, such buffering means  Pre-purchase stage
having customers wait in the service  Service encounter stage
process. Therefore, areas closely  Post encounter stage
related to service process
management involve the balancing of
demand and capacity, design of
waiting and queuing systems, and
management of the impact of waiting
on the customer’s psychology.

(6) Physical Environment

 The appearance of buildings,
landscaping, vehicles, interior
furnishings, equipment, staff
members’ uniforms, signs, printed
materials, and other visible cues
provide tangible evidence of a firm’s
service quality.
 The service scape also facilitates
service delivery, and guides
customers through the service
process. Service firms need to
manage services capes carefully,
since they can have an impact on Multi-attribute Model
  Temporal - wasting time,
consequences of delay
 Physical - personal injury or damage
to possessions
 Psychological - personal fears and
emotions
 Social - how others think and react
 Sensory - unwanted effects on any of
the five senses
If you were the provider of a service, what
would you do to influence the target How can we avoid this kind of risks?
customer to come to your store/shop?
When can you tell that you are a “satisfied
Three Consumer Attributes in Service customer”?
Evaluation
 Search attributes – they are tangible Components of Customer Expectations
characteristics that customers can  Desired service - a “wished for” level
evaluate before purchase. — a combination of what customers
 Experience attributes – they cannot be believe can and should be delivered
evaluated before purchase. in the context of their personal
Customers must “experience” the needs.
service before they can assess  Adequate service - the minimum level
attributes such as reliability, ease-of- of service customers will accept
use, and customer support. without being dissatisfied.
 Credence attributes are characteristics  Predicted service - the level of service
that customers find hard to evaluate that customers actually anticipate to
even after consumption. Here, the receive. Predicted service can also be
customer is forced to believe or trust affected by service provider promises
that certain tasks have been word-of-mouth, and past
performed at the promised level of experiences.
quality.  Zone of tolerance - The extent to
which customers are willing to accept
this variation is called the zone of
tolerance.

Service Encounter Stage

Perceived Risks by Consumers

 Functional - unsatisfactory
performance outcome
 Financial - monetary loss, unexpected Levels of customer contact with service
costs firms
  High-Contact Services - there is direct
contact between customers and the How Is Customer Delight Different From
firm throughout the entire service Satisfaction?
delivery.
 Low-Contact Services - involve little, Service Quality
physical contact if any, between Customer Satisfaction versus Service
customers and service providers. Quality
 Both customer satisfaction and
The Servuction System service quality are defined as
 Technical core — where inputs are contrasting customers’ expectations
processed and the elements of the with their performance perceptions.
service product are created. This
technical core is typically back-stage Dimensions of Service Quality
and invisible to the customer. (ex. 1. Tangibles (appearance of physical
kitchen at a restaurant) elements)
 Service delivery system — where the 2. Reliability (dependable and
final “assembly” takes place and the accurate performance)
product is delivered to the customer. 3. Responsiveness (promptness and
helpfulness)
Role and Script Theories 4. Assurance (credibility, security,
 Role Theory - employees and competence, and courtesy)
customers act out their parts in the 5. Empathy (easy access, good
performance according to communications, and customer
predetermined roles. understanding)
 Script Theory - service script specifies
the sequences of behavior employees
and customers are expected to learn
and follow during service delivery.

Post-encounter Stage
The Expectancy-Disconfirmation Model of
Satisfaction.

 If performance perceptions are worse

than expected, it is called negative
disconfirmation.
 If performance is better than
expected, it is called positive
disconfirmation, and if it is as
expected, then it is simply called
confirmation of expectations.

Are Expectations Always the Right

Comparison Standard?
 from avoiding errors to providing
desirable “extras” to supplement the
core service. Likewise, “convenience”
could refer to a service that is
delivered at a convenient location,
available at convenient times, or easy
to use.

Developing a services marketing positioning

strategy

Customer Loyalty
 Loyalty is a customer’s willingness to
continue patronizing a firm over the
long-term, preferably on an exclusive
basis, and recommending the firm’s
products to friends and associates.
Customer loyalty extends beyond
behavior and includes preference,
liking, and future intentions.
-------------------------------------------------------
-------

CHAPTER 3 – POSITIONING SERVICES IN

COMPETITIVE MARKETS

Customer-Driven Services Marketing Customer, Competitor, and Company

Strategy Analysis (3CS)
 As competition intensifies in the Customer Analysis
service sector, it is becoming ever  The customer analysis is typically
more important for service done first and this includes an
organizations to differentiate their examination of overall market
products in ways that are meaningful characteristics, followed by an in-
to customers. depth exploration of customer needs
 What makes consumers or and related customer characteristics
institutional buyers select — and and behaviors.
remain loyal to — one supplier over  The market analysis tries to establish
another? the attractiveness of the overall
market and potential segments within.
Service vs. Convenience  The customer needs analysis involves
 Terms such as “service” typically answering a few questions. Who are
subsume a variety of specific the customers in that market in terms
characteristics, ranging from the of demographics and psychographics?
speed with which a service is delivered What needs or problems do they
to the quality of interactions between have?
customers and service personnel; and
Competitor Analysis Segmentation is one of the most important
 Identification and analysis of concepts in marketing. Service firms vary
competitors can provide a marketing widely in their abilities to serve different
strategist with a sense of competitors’ types of customers.
strengths and weaknesses.
There are many ways to segment a market,
Company Analysis and marketing experts typically combine and
 In an internal corporate analysis, the integrate several approaches.
objective is to identify the 1. Demographic segmentation
organization’s strengths in terms of its 2. Psychographic segmentation
current brand positioning and image, 3. Behavioral segmentation
and the resources the organization has 4. Needs-based segmentation

In addition, you need to recognize that often

Segmentation, Targeting, and people have different needs and their
Positioning (STP) decision-making criteria vary according to:
Segmentation 1. The purpose of using the service
 Dividing the population of possible 2. Who makes the decision
customers into groups. A market 3. The timing of use
segment is composed of a group of 4. Whether the individual is using the
buyers who share common service alone or with a group, and if
characteristics, needs, purchasing the latter, the composition of that
behavior, and/or consumption group
patterns.
Targeting
 Once a firm’s customers have been Targeting Service Markets
segmented, the firm has to assess the  In marketing terms, focus means
attractiveness of each segment, and providing a relatively narrow product
decide which segment(s) would most mix for a particular target segment.
likely be interested in its service, and  Market focus is the extent to which a
focus on how to serve them well. firm serves few or many markets,
Positioning while service focus describes
 The unique place that the firm and/or the extent to which a firm offers few or
its service offerings occupy in the many services. These two dimensions
minds of its consumers. define the four basic focus strategies

Basic focus strategies for services

Segmenting Service Markets
 1. Fully-focused: A fully-focused
organization provides a limited range
of services (perhaps just a single core
product) to a narrow and specific
market segment.
2. Market-focused: In a market-focused
strategy, a company offers a wide
range of services to a narrowly defined
target segment
3. Service-focused: Service-focused firms
offer a narrow range of services to a
fairly broad market.
4. Unfocused: Many service providers fall
into the unfocused category, because
they try to serve broad markets and
provide a wide range of services.

Principles of Positioning Services using Axes of Comparison: Common axes for

Positioning Maps to Plot Competitive comparing hotels include price and quality of
Strategy service. For the Philippines, this helps
highlight the distinction between budget-
Service Positioning friendly hotels and luxury accommodations.
 Positioning refers to the way a service
is perceived by customers in relation Example Map:
to its competitors. It’s crucial for  Luxury Hotels: High price, high quality
services because it allows businesses (e.g., Shangri-La, Manila)
to differentiate themselves in a  Mid-range: Moderately priced,
competitive marketplace. This reasonable quality (e.g., Seda Hotels)
differentiation creates a unique value  Budget Hotels: Low price, moderate
proposition that appeals to a specific quality (e.g., Red Planet Hotel)
segment of the market.
Mapping Future Scenarios to Identify
Principles Of Positioning Services Using Competitive Responses
Positioning Maps Scenario Planning: Predicting future trends
 These maps are used to visually allows hotels to proactively position
compare services or products in themselves. For instance:
relation to competitors, typically along  Sustainability: Growing demand for
two key dimensions. For hotels, these eco-friendly accommodations. Hotels
dimensions might be price and service like The Circle Hostel are gaining
quality, which are critical factors popularity as they cater to eco
influencing customer decisions. conscious travelers.
 Staycations: Post-pandemic, there’s
Example of Applying Positioning Maps to the been a rise in local travel, with more
Hotel Industry: Filipinos looking for short, accessible
getaways within the country.
 Hotels offers a model for this approach
by providing essential services at low
prices, without compromising on guest
experience.
Differentiation and Communication
 To effectively differentiate, hotels need
to focus on offering unique
experiences—such as Filipino-inspired
hospitality or eco-friendly initiatives—
and communicate these consistently
across marketing channels. Clear and
Positioning Charts Help Executives consistent communication helps
Visualize Strategy reinforce their market position in the
 Simplifying Strategy: For hotels like minds of potential customers.
Seda Hotels, positioning charts reveal -------------------------------------------------------
potential for growth in underserved -------
segments. If they focus on regional
cities, they can tap into demand for CHAPTER 4 – DEVELOPING SERVICE
high-quality accommodations outside PRODUCTS AND BRANDS
of major urban centers.
 Guiding Decisions: Executives can use Creating Service Products
these maps to make strategic  Creating service products means
decisions such as adjusting their designing and delivering intangible
pricing models, targeting new offerings that provide value to
customer demographics (e.g., local customers. Unlike physical goods,
tourists), or adding services like digital service products are experiences or
check-ins to cater to tech-savvy actions performed for the customer,
travelers. such as consulting, education, or
maintenance services. The process
involves identifying customer needs,
developing a clear and unique service
offering, setting up efficient delivery
methods, training staff, pricing
appropriately, and continuously
improving based on feedback and
market trends. Essentially, it's about
crafting valuable experiences that
meet customer demands and stand
out in the marketplace.

Developing an Effective Positioning What are the components of service

Strategy products?
Customer-Centric Approach Core Product
 In a market like the Philippines, where  The core product is the fundamental
travelers are increasingly looking for benefit or value that a customer
affordable yet high-quality services, receives from a service. It represents
positioning strategies should be the primary reason why the customer
aligned with these preferences. Go chooses to engage with the service in
the first place. Essentially, it's the
 essential purpose of the service, satisfaction and contribute to a positive
stripped of any supplementary overall experience.
features or enhancements.
For example: Delivery Processes
 In a hotel service, the core product is  Delivery processes refer to the steps
the accommodation provided— a place and procedures involved in providing a
to sleep and rest. service to customers. These processes
 For a consulting firm, the core product ensure that the core and
is the expert advice and solutions supplementary services are delivered
offered to solve specific business efficiently, effectively, and in a way
problems. that meets or exceeds customer
 In a healthcare service, the core expectations. The delivery process is
product is the medical care and crucial for creating a positive customer
treatment provided to improve health. experience and maintaining service
The core product focuses on meeting the quality.
fundamental needs and expectations of the
customer, which is central to the service’s The design of the service offering must
value proposition. address the following issues:
 How the different service components
Supplementary Services are delivered to the customer.
 Supplementary services are additional  The nature of the customers’ role in
features or benefits that enhance the those processes.
core service and improve the overall  How long delivery lasts.
customer experience. These services  The prescribed level and style of
support the main offering, making it service to be offered.
more comprehensive and attractive to
customers. They can add value, The Flower of Service
differentiate the service from  The "flower of service" is a concept
competitors, and help build customer that helps us understand how various
loyalty. elements come together to create a
Here are some examples of supplementary great customer experience. Think of
services: the core service as the central flower
 In a hotel: Besides the core service of and the additional services as its
providing accommodation, petals. For instance, in a hotel, the
supplementary services might include core service is providing a place to
room service, concierge assistance, stay, while the petals are things like a
free Wi-Fi, a spa, or airport transfers. smooth check-in process, helpful
 In a restaurant: Supplementary concierge, or complimentary
services could be special dietary breakfast. Each petal adds value and
accommodations, valet parking, or enhances the overall experience,
personalized menus. making it more memorable and
 In a healthcare service: satisfying for the customer.
Supplementary services might include
patient education, follow-up
consultations, or telemedicine options.
These services are not essential to the core
offering but can significantly enhance
customer
 o Memberships in club/programs
o Subscription services (e.g.,
utilities)
o Enrolment-based services (e.g.,
financial credit, college
enrolment)

Billing – Billing is common to almost all

services (unless the service is provided free-
of-charge). Inaccurate, illegible, or
incomplete bills risk disappointing customers
who may, up to that point, have been quite
satisfied with their experience. If customers
Facilitating Supplementary Services are already dissatisfied, the billing mistake
Know how facilitating supplementary may make them even angrier. Billing should
services relate to the core product. also be timely, because it encourages people
to make faster payment. Billing can be:
Information – To obtain full value from any  Periodic statements of account
good or service, customers need relevant activity.
information. Information includes the  Invoices for individual transactions.
following:  Verbal statements of amount due.
 Direction to service site  Online or machine display of amount
 Schedules/service hours due for self-payment transactions.
 Price information
 Terms and conditions of sale/service Payments – In most cases, a bill requires the
 Advice on how to get the most value customer to take action on payment (and
from a service such action may be very slow in coming!).
 Warnings and advice on how to avoid Exceptions include bank statements and
problems other direct debit payment services, which
 Confirmation of reservations shows the charges to be deducted from a
 Receipts and tickets customer’s account. A variety of payment
 Notification of changes options exist, but customers expect them to
 Summaries of account activities be easy to use and convenient. They include:
 Self-service
Order-taking – Once customers are ready to o Inserting card, cash, or token
buy, a key supplementary element comes into machine
into play — order-taking. Order-taking o Electronic funds transfer
includes: o Mailing a check
 Order entry
o Entering credit card information
o On-site order entry
online
o Mail/telephone/email/online/
o Online payment systems such
mobile app order
as PayPal, Google Wallet, or
 Reservations or check-ins
Bitcoins
o Seats/tables/rooms
 Direct to payee or intermediary
o Vehicles or equipment rental o Cash handling or change giving
o Professional appointment o Check handling
(Figure 4.7)  Automatic deduction from financial
 Applications deposits
 o Automated systems (e.g.,  Food and beverages
machine-readable tickets that  Toilets and washrooms
operate entry gate)  Waiting facilities and amenities
o Pre-arranged automatic o Lounges, waiting areas, seating
deduction for bill payment o Weather protection
through direct debit (e.g., for o Magazines, entertainment,
bank loans and post-paid cell newspapers
phone subscription plans)  Transport

Enhancing Supplementary Services Safekeeping – When customers are visiting a

Consultation – Now we move on to enhancing service site, they often want assistance with
supplementary services, led by consultation. their personal possessions. In fact, some
In contrast to information, which suggests a customers may not visit at all unless certain
simple response to customers’ questions (or safekeeping services are provided (such as
printed information that anticipates their safe and convenient parking for their cars).
needs), consultation involves a dialog to Safekeeping includes caring for:
probe for customer requirements and then  Child care, pet care
develop a tailored solution.  Parking for vehicles, valet parking
 Customized advice  Coat rooms
 Personal counseling  Baggage handling
 Tutoring/training in service use  Storage space
 Management or technical consulting  Safe deposit boxes

Counseling – represents a more subtle Exceptions – Exceptions involve

approach to consultation because it involves supplementary services that fall outside the
helping customers to better understand their routine of normal service delivery. Astute
situations so they can come up with their businesses anticipate such exceptions and
“own” solutions and action programs. This develop contingency plans and guidelines in
approach can be a particularly valuable advance. That way, employees will not
supplement to services such as health appear helpless and unprepared when
treatments, in which part of the challenge is customers ask for special assistance.
to get customers to make significant lifestyle
changes and live healthily. Special Requests: A customer may request
For example, diet centers like Weight service that requires a departure from
Watchers use counseling to help customers normal operating procedures. Common
change behaviors so that weight loss can be requests relate to personal needs, including
sustained after the initial diet is completed. the care of children, dietary requirements,
medical needs, religious observance, and
Hospitality – Hospitality-related services personal disabilities. Such requests
should ideally reflect pleasure at meeting particularly are common in the travel and
new customers and greeting old ones when hospitality industries.
they return. Well-managed businesses try, at Problem Solving: Sometimes normal service
least in small ways, to ensure that their delivery (or product performance) fails to run
employees treat customers as guests. smoothly as a result of accident, delay,
Courtesy and consideration for customers’ equipment failure, or a customer having
needs apply to both face-to-face encounters difficulty in using a product.
and telephone interactions. Hospitality
elements include:
 Greeting
Handling of connection and overall satisfaction of the
complaints/suggestions/compliments: This customer. Effective branding across all these
activity requires well-defined procedures. It areas helps establish loyalty, attract new
should be easy for customers to express customers, and drive long-term success.
dissatisfaction, offer suggestions for
improvement, or pass on compliments, and Branding Service Firms
service providers should be able to make an Example: Consulting Firm McKinsey &
appropriate response quickly. Company
 Focus: McKinsey brands itself as a top-
Restitution: Many customers expect to be tier management consulting firm by
compensated for serious performance emphasizing its deep industry
failures. Compensation may take the form of expertise, high-profile client base, and
repairs under warranty, legal settlements, a rigorous problem-solving approach.
refunds, an offer of free service, or other The firm’s branding includes a clean,
form of payment-in-kind. professional visual identity, thought
leadership through publications, and a
Managerial Implications reputation for delivering impactful
Managerial implications are about taking key business solutions.
insights or findings and turning them into Example: Apple iPhone
practical actions that drive a company’s  Focus: Apple’s branding for the iPhone
success. This means making smart decisions centers on sleek design, cutting-edge
about strategy, operations, and resources technology, and a premium user
based on new information. Managers need to experience. The brand uses minimalist
adapt their plans to improve efficiency, aesthetics, innovative features, and a
structure, and employee engagement, while strong emphasis on privacy and
also addressing financial, marketing, and risk security to differentiate the iPhone
considerations. Ultimately, it’s about using from competitors. Marketing
these insights to make informed choices that campaigns often highlight the
enhance performance, foster innovation, and product’s seamless integration with
ensure the organization is well-positioned to the broader Apple ecosystem.
meet its goals. Example: Disney Theme Parks
 Focus: Disney brands its theme parks
Branding Service Firms, Products, and as immersive, magical experiences for
Experiences all ages. This branding is reflected in
Branding service firms, products, and everything from the enchanting park
experiences involves creating a strong, design and themed attractions to the
distinct identity that resonates with exceptional customer service and
customers and differentiates a company from attention to detail. Disney’s branding
its competitors. For service firms, branding aims to create lasting memories and a
focuses on building trust and credibility sense of wonder, ensuring that every
through consistent quality, customer service, aspect of the visitor experience
and reputation. For products, it’s about reinforces its reputation for magic and
crafting a unique value proposition and visual family fun.
identity that highlights features and benefits,
ensuring the product stands out in the Branding Strategies for Services
marketplace. When it comes to experiences, Branded House
branding is about creating memorable,  is a strategy where more than one
engaging interactions that leave a lasting company’s products are sold under
impression, often emphasizing the emotional one name/branding umbrella. This
 approach is optimal if the master In other words, the master brand
brand/company wants more control backs up all of the sub-brands.
over the end product’s production,
distribution, and cost.

Branding Strategies for Services

Sub Brand
 are connected to a parent brand and Branding Strategies for Services
get help and support from it. As well House of Brands
as having traits that are similar to the  The house of brands architecture plan,
parent brand, sub brands also have which is also called pluralistic, is made
traits that are unique to them. up of a bunch of sub-brands that have
nothing to do with each other. The
master brands have nothing to do with
any of the sub-brands in this system.
In other words, you can't even see the
name of the parent company, and new
brands are being made so that each
one has its own look.

Branding Strategies for Services

Endorsed Brands
 have some kind of synergy between
the main brand and the sub-brand. In
this structure, the main brand has
some power over all the other names.
 To build a strong brand, we need to
understand what contributes to brand equity.
Brand equity is the value premium that
comes with a brand. It is what customers are
willing to pay for the service, beyond what
they are willing to pay for a similar service
that has no brand.
1. Company’s presented brand — mainly
through advertising, service facilities
and personnel.
2. External brand communications —
from word of mouth and publicity.
These are outside of the firm’s control.
3. Customer experience with the
company — what the customer has
gone through when they patronized
the company.
4. Brand awareness — the ability to
recognize and recall a brand when
provided with a cue.
Tiering Service Products with Branding 5. Brand meaning — what comes to the
There are many service industries that use customer’s mind when a brand is
branding to not mentioned.
only set basic services apart but also make 6. Brand equity — the degree of
service levels marketing advantage that a brand has
stand out. It's called "service tiering." It's over its competitors.
popular in places
like hotels, airlines, car rentals, and tech New Service Development
support for both One of the serious challenges service firms
hardware and software. face in recent times is new service process
development. Customer want new products
and competitors do their best to surpass the
company. The increased level of competition,
the rapid pace of change in technology and
innovation, growing consumer awareness
and heightened consumer expectation,
established, beyond, doubt, the need for
introducing new services must faster than
the competitors in the market. The faster
offer provides greater millage for firms to
face competition and win consumers.

A Hierarchy of New Service Categories

1. Major service innovations –New core
products for previously undefined
markets
2. Major process innovations –Using new
Building Brand Equity processes to deliver existing products
with added benefits
 3. Product-line extensions –Additions to What? How? Where? When? Responses to
current product lines these four questions form the foundation of
4. Process-line extensions –Alternative any service distribution strategy. They
delivery procedures determine the customer’s service
5. Supplementary service innovations – experience, which is a function of how the
Addition of new or improved different elements of the Flower of Service
facilitating or enhancing elements are distributed and delivered through
6. Service improvements –Modest physical and electronic channels.
changes in the performance of current
products What is Being Distributed?
7. Style changes –Visible changes in If you mention distribution, many people will
service design or scripts likely think of moving boxes through physical
channels to distributors and retailers for sale
Achieving Success in New Service to end-users. In services though, often there
Development is nothing to move. Experiences,
1. Market synergy: The new product fits performances, and solutions are not
well with the firm's image, expertise, physically shipped and stored. Meanwhile,
and resources; it meets customers' informational transactions are increasingly
needs better than competing products conducted via electronic channels.
because the firm knows how its  Information and promotion flow —
customers buy things and gets strong distribution of information and
support from the firm and its branches promotion materials relating to the
during and after the launch. service offer. The objective is to get
2. Organizational factors: There is a lot of the customer interestedin buying the
planning and cooperation between service.
functions. People who work in product  • Negotiation flow — reaching an
development need to know why they agreement on the service features and
are there and how important new configuration,and the terms of the
goods are to the business. Before the offer, so that a purchase contract can
launch, employees need to know be closed. The objective isoften to sell
about the new product and how it the right to use a service (e.g., sell a
works, as well as specifics about the reservation or a ticket).
main competitors.  Product flow — many services,
3. Market research factors—Studies of especially those involving people
the market are done early on in the processing orpossession processing,
growth process and are carefully and require physical facilities for delivery.
scientifically planned. The researchers Here, distribution strategy requires
know what kind of information they development of a network of local
want to gather. Before outdoor surveys sites. For information-processing
are done, a good definition of the services, such as Internet banking and
product idea is. distance learning, the product flow can
------------------------------------------------------- be via electronic channels, employing
------- one or more centralized sites.

CHAPTER 5 – DISTRIBUTING SERVICES How should a Service be Distributed?

THROUGH PHYSICAL AND ELECTRONIC How should services be distributed? Here, a
CHANNELS key question is: Does the service or the
What? How? Where? When? firm’s positioning strategy require customers
to be in direct physical contact with its Service convenience means saving
personnel, equipment, and facilities? time and effort rather than saving
money.

Channel Integration is Key

Where should a Service Facility be

Located?
Physical Site Location
Customer Visit the Service Site  Investment of Money
Service Providers Go to Their Customers  Long-term commitments
The Service Transaction is Conducted  Lease agreement
Remotely Two-step Approach
1. Strategic Location Considerations
2. Tactical Considerations
To Develop a Location Strategy
 Understanding customer needs and
expectations
 Competitive activity
 Nature of the service operation
Using Electronic Channels
 Flexibility
 Convenience
 Time

Tactical Location Considerations

Key factors that need to be considered
include:
Channel Preferences Vary Among Customers  Population size and characteristics.
 For complex and perceived high-risk  Pedestrian and vehicular traffic.
services, people tend to rely on  Convenience of access for customers
personal channels. For example, (public transportation, availability of
customers are happy to apply for parking).
credit cards using remote channels,  Competitors in this area.
but prefer a face-to-face transaction  Nature of nearby businesses and
when obtaining a mortgage. stores.
 Individuals with higher confidence and  Availability of labor.
knowledge about a service and/or the  Availability of site locations, rental
channel are more likely to use costs, and contractual conditions
impersonal and self-service channels (length of lease, legal restrictions) and
 Customers who look for the functional regulations (on zoning and opening
aspects of a transaction prefer more hours).
convenience. This often means the use
of impersonal and self-service Locational Constraints
channels. Customers with social Hospital
motives tend to use personal  Single location (very large facility)
channels.  Medical specialists - as opposed to
 Convenience is a key driver of channel general practitioners, often find it
choice for the majority of consumers. convenient to locate their offices close
 to a hospital because it saves them
time when they need to treat their Factors that Encourage Extended Operating
patients. Hours
Airport  Pressure from consumers - The
 Inconveniently located relative to: growing number of two-income
 Traveler’s homes, offices, or families and single wage-earners who
destinations because of noise and live alone need time outside normal
environmental factors. working hours to shop and use other
services. Other customers like to enjoy
Innovative Location Strategies the convenience to go shopping and
Mini-stores do their service transactions at any
LRT/MRT Station time of the day and the week. Once
 ex. LRT/MRT station helps passengers one store or firm in any given area
get to the city from the airport more extends its hours to meet the needs of
conveniently. these market segments, competitors
Automated Kiosk often feel the need to follow.
 Self-service machine that can be  Changes in legislation - Support has
located within stores, hospitals and declined for the traditional religious
airports to pay bills/order. view that a specific day (Sunday in
predominantly Christian cultures)
should be legalized as a day of rest for
one and all, regardless of religious
Locating in Multi-purpose Facilities
affiliation.
The most obvious locations for consumer
 Economic incentives to improve asset
services are close to where customers live or
utilization - A great deal of capital is
work. Modern buildings are often designed to
often tied up in service facilities. The
be multi-purpose, featuring 1 not only office
incremental cost of extending hours
or production space but also services such as
tends to be relatively modest, and if it
a bank (or at least an ATM), a restaurant, a
reduces crowding and increases
hair salon, several stores, and maybe a
revenues, then it is economically
health club. Some companies even include a
attractive. There are costs involved in
children's daycare facility to make life easier
shutting down and reopening a facility
for busy working parents.
such as a supermarket, yet climate
Interest is growing in locating retail and other
control and some lighting must be left
services on transportation routes and in bus,
running all night, and security
rail, and air terminals.
personnel must be paid 24/7. So, even
if the number of extra customers
When Should Service be Delivered?
served is minimal, there are both
In the past, most retail and professional
operational and marketing advantages
services in industrialized countries followed a
to remaining open 24 hours.
traditional schedule: traditional schedule: 40-
 Availability of employees to work
50 hours a week
during "unsocial" hours - Changing
Historically, Sunday opening was strongly
lifestyles and a desire for part-time
discouraged in most Christian cultures and
employment have created a growing
was often prohibited by law.
labor pool of people who are willing to
Today, the situation has changed. For some
work evenings and nights. They
highly responsive service operations, the
include students looking for part-time
standard has become 24/7 service - 24 hours
work outside classroom hours, people
a day, 7 days a week, around the world.
working second jobs, parents juggling
 childcare responsibilities, and others
who simply prefer to work at night and Franchising
relax or sleep in the day. A franchisor recruits entrepreneurs who are
 Automated self-service facilities - Self- willing to invest their time, effort, and equity
service equipment has become in managing a previously developed service
increasingly reliable and user-friendly. concept. In return, the franchisor provides
Many machines now accept card- and training on how to operate and market the
cellphone-based payments, in addition business, sells necessary supplies, and
to coins and banknotes. Therefore, provides promotional support at a national or
installing unattended machines may regional level. Local marketing activities are
be economically feasible alternative typically paid for by the franchisee, but they
for locations that cannot support a must adhere to copy and media guidelines
staffed facility. Unless a machine prescribed by the franchisor.
requires frequent servicing or is Subway is a popular American fast-food
particularly vulnerable to vandalism, franchise
the incremental cost of going from
limited hours to 24-hour operation is Disadvantages of Franchising
minimal. In fact, it may be simpler to  Loss of control over the delivery
leave machines running continuously system.
than to turn them on and off.  Low level of customers experience the
actual service.
Who should be involved in delivering  Low employee performance.
which parts of the service?  They may start to resent the various
fees paid to the franchisor.
The role of Intermediaries
 Information Other Intermediaries
 Negotiation Other service distribution agreements can be
contractual such as those used in financial
services. Banks seeking to move into
investment services will often act as the
distributor for mutual fund products created
by an investment firm lacking extensive
distribution channels of its own. Many banks
also sell insurance products underwritten by
an insurance company. They collect a
commission on the sale, but are normally not
involved in handling claims.
Splitting Responsibilities for Service Delivery
The Challenge of Distribution in Large
Domestic
Large domestic markets like US, Canada, or
Australia are less homogeneous than
national stereotypes suggest. Careful market
segmentation, focusing on specific
segments, and balancing standardization and
adaptation strategies enhance a firm's
chances of succeeding in developing large
national service penetration.
Factors Favoring Adopting of
Transnational Strategies
 Market Drivers: Similar global
customer needs.
 Competition Drivers: Intense
international competition.
 Technology Drivers: Advanced global
technologies.
 Cost Drivers: Pressure for lower costs.
 Government Factors: Favorable
international regulations.

How does the nature of a service affect

international distribution?

Regulation remains a major challenge for

many services as their markets are often
highly regulated such as in the air travel,
healthcare and financial services however,
new business models in more mundane
markets, such as uber in the taxi and airbnb
in the accommodation market also face stiff
regulatory hurdles around the world.

How to enter international markets?

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